Slippage
Slippage is the difference between the price you expected when placing an order and the price at which it was actually filled.
You click buy at $50.00 and the confirmation says $50.07. Those seven cents are slippage. It happens because prices and the orders waiting in the market change in the moment between deciding and executing, and because a large order can use up the best prices. Slippage is small on a single trade in a liquid market, but it is a real, recurring cost — and in fast markets or gaps it can be the biggest cost of all.
- Category
- Market Structure
- Reading time
- 6 min
- Also called
- Slippage cost, Negative slippage, Positive slippage
- Updated
Slippage in plain words
The price on your screen is the last trade or the best quote a moment ago. By the time your order arrives, it may have changed. A market order fills at the best available price, which is not guaranteed to be the price you saw.1
Slippage against you is called negative slippage; occasionally the fill is better than expected, which is positive slippage. Most traders mean the negative kind when they say “slippage”.
Where slippage comes from, step by step
The spread
A market buy pays the ask and a market sell receives the bid, so the gap to the mid price is a built-in cost. See Bid-Ask Spread.
Order size vs. depth
If your order is larger than the size at the best price, the rest fills at the next prices, so parts of a large market order can execute at different prices.1 See Order Book.
Speed
Prices and available orders change by the time your order executes, so the fill can differ from the last price you saw.1
Thin sessions
Outside regular hours there are fewer participants and spreads are generally wider.3
Measure it
Record the price you expected and the fill you got on every trade. The average difference is your real execution cost.
Worked examples
Example 1 — Slippage on a market order
DepthA trader sees a stock at $50.00 and sends a market order for 400 shares. Offered: 150 at $50.02, 150 at $50.05 and 300 at $50.09.
| Fills | 150 × $50.02 + 150 × $50.05 + 100 × $50.09 |
| Total | $7,503 + $7,507.50 + $5,009 = $20,019.50 |
| Average price | ≈ $50.049 |
| Slippage vs. $50.00 | ≈ $0.049 a share, $19.50 in total |
No single fill was dramatic, but walking through three price levels cost about 5 cents a share.
Example 2 — A stop that gapped
GapA trader holds 200 shares with a stop at $48. After bad overnight news the stock opens at $44.50; the stop triggers and fills at $44.40.
| Planned loss from $50 entry | 200 × $2.00 = $400 |
| Actual loss | 200 × $5.60 = $1,120 |
| Slippage on the stop | $3.60 a share, $720 in total |
A stop limits loss in normal trading but cannot jump a gap. Position size should allow for this possibility. See Gap Risk.
Example 3 — Slippage adds up
CostA day trader makes 20 round trips a month, 500 shares each time, with average slippage of $0.02 on entry and $0.02 on exit.
| Per round trip | 500 × $0.04 = $20 |
| Per month | 20 × $20 = $400 |
| Per year | $4,800 |
Two cents looks like nothing; over a year it is a significant cost before commissions and spreads. Frequent traders must have an edge large enough to cover it.
How a market order walks the book
How order types handle slippage
Why slippage matters
True trading costs
Slippage belongs in every cost estimate alongside commissions and spreads. See Trading Fees and Commissions.
Realistic backtests
Backtests that assume perfect fills overstate results, especially for short-term strategies. See Backtesting.
Order choice
Knowing when slippage is likely helps decide between market and limit orders. See Limit Order.
Sizing in thin markets
In illiquid assets, slippage limits how large a position you can sensibly take. See Liquidity.
Advantages and disadvantages
Advantages
- Measurable: every fill can be compared with the expected price.
- Controllable to a large degree through order type, size and timing.
- Understanding it makes cost estimates and backtests realistic.
Disadvantages
- Cannot be eliminated for market and stop orders.
- Largest exactly when you most need to trade — in fast markets.
- Gaps can produce slippage far larger than normal.
- Easy to overlook because each instance looks small.
Going deeper
Read as far as you need. Each level builds on the one before it.
Expected price vs. fill price
Beginner
Write down the price you expect before every order and compare it with the fill. After twenty trades you will know your typical slippage.
Slippage tolerance in crypto
Intermediate
Decentralised exchanges let you set a slippage tolerance: the maximum price change you accept before the swap fails. Too tight and swaps fail; too loose and you can be exploited by bots that trade around your order. See Slippage Tolerance.
Market impact and implementation shortfall
Advanced
Large traders measure slippage as implementation shortfall: the gap between the price when they decided to trade and their final average price, including fees and any unfilled part. They reduce it by splitting orders over time and venues, at the cost of exposure to price changes while they wait. See Implementation Shortfall and Market Impact.
Common mistakes
Using market orders in thin markets
In illiquid stocks or tokens, a market order can fill far from the quote. Use limits.
Trading at the open or on news with market orders
Spreads and price jumps are largest then; slippage follows.
Ignoring slippage in backtests
A strategy that makes 3 cents a trade may lose money after real fills.
Sizing as if stops are exact
Allow for stops filling beyond their price, especially overnight.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Slippage is the gap between the expected price and the actual fill.
- It comes from the spread, order size vs. depth, speed and gaps.
- Market and stop orders can slip; limit orders cap the price but may not fill.
- Small per-trade slippage adds up for frequent traders.
- Measure your own slippage and include it in every cost estimate and backtest.
Frequently asked questions
Why did my order fill at a different price?
How do I avoid slippage?
Can slippage be positive?
Further learning
- Market Order
The order type where slippage most often appears.
- Limit Order
The main tool for controlling slippage.
- Liquidity
Why thin markets slip more.
- Stop Loss
How stops behave in fast markets and gaps.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Investor.gov (SEC). Understanding Order Types – Investor Bulletin (opens in a new tab) Checked .
- Investor.gov (SEC). Stop, Stop-Limit, and Trailing Stop Orders – Investor Bulletin (opens in a new tab) Checked .
- Investor.gov (SEC). Extended-Hours Trading: Investor Bulletin (opens in a new tab) Checked .
Read more elsewhere
- Trading Metrics (our sister site): Slippage (opens in a new tab)
- Investopedia: Slippage (opens in a new tab)
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. Trading Metrics is our sister site, under the same ownership; we are not affiliated with any other publisher linked above. Last reviewed . Report an error or request a source credit.